Phillips 66 Partners Reports First-Quarter 2018 Earnings

Phillips 66 Partners LP (NYSE: PSXP) announces first-quarter 2018
earnings of $172 million, or $0.87 per diluted common unit. Cash from
operations was $171 million, and distributable cash flow was $194
million. Adjusted EBITDA was $247 million in the first quarter, compared
with $254 million in the prior quarter.

“Our first-quarter operating results reflect a $1 billion run-rate
adjusted EBITDA, nearing our $1.1 billion year-end target and 30 percent
five-year distribution CAGR,” said Greg Garland, chairman and CEO of
Phillips 66 Partners. “We recently announced the Gray Oak Pipeline
project, our largest organic growth project to date, which expands our
footprint in the high-growth Permian Basin. We will continue to fund our
organic projects in 2018 with cash on hand, debt capacity and selective
use of our ATM program.”

On April 18, 2018, the general partner’s board of directors declared a
first-quarter 2018 cash distribution of $0.714 per common unit, a 5.3
percent increase over the previous quarter distribution of $0.678 per
common unit. The Partnership has increased its distribution per common
unit every quarter since its initial public offering in July 2013.

Financial Results

Phillips 66 Partners’ earnings for the first quarter of 2018 were $172
million, compared with $162 million in the fourth quarter of 2017. The
improvement reflects higher equity earnings, primarily driven by a
one-time benefit from U.S. tax reform related to Explorer Pipeline, as
well as improved joint venture volumes. These items were partially
offset by lower volumes at certain wholly owned pipelines and terminals,
reflecting the impact of turnarounds at refineries operated by Phillips
66.

Liquidity, Capital Expenditures and Investments

As of March 31, 2018, total debt outstanding was $2.9 billion. The
Partnership had $167 million in cash and cash equivalents and $750
million available under its revolving credit facility.

The Partnership’s total capital spending for the quarter was $69
million, which included $12 million of maintenance capital. Expansion
capital was $57 million, which included spending on construction of a
new isomerization unit at the Phillips 66 Lake Charles Refinery, as well
as investments in the Sand Hills and Bayou Bridge pipelines.

Strategic Update

Phillips 66 Partners recently announced it has received sufficient
binding commitments to proceed with construction of the Gray Oak
Pipeline system. The Gray Oak Pipeline will provide crude oil
transportation from West Texas to destinations in the Corpus Christi and
Sweeny/Freeport markets, including the Phillips 66 Sweeny Refinery. A
second binding open season is underway to determine the final scope and
capacity of the pipeline system, which could be up to 700,000 barrels
per day (BPD). Assuming the pipeline is fully subscribed, its capacity
could ultimately be expanded to approximately 1 million BPD of long-haul
takeaway. Phillips 66 Partners will initially own a 75 percent interest
in the pipeline system. Other third parties have an option to acquire up
to 32.75 percent interest in the joint venture. If all options are
exercised, Phillips 66 Partners would own 42.25 percent. The pipeline is
expected to be placed in service by the end of 2019.

In Corpus Christi, the Gray Oak Pipeline will connect to the new South
Texas Gateway Terminal under development by Buckeye Partners, L.P. The
marine terminal will have an initial storage capacity of 3.4 million
barrels and is expected to begin operations by the end of 2019. Phillips
66 Partners will have a 25 percent ownership interest in the joint
venture that owns the terminal.

Phillips 66 Partners is developing a new pipeline that will connect
clean product storage in Lake Charles, Louisiana, to its Clifton Ridge
Marine Terminal, which will expand product export capability for the
Phillips 66 Lake Charles Refinery. The approximately $25 million project
will be backed by a long-term agreement with Phillips 66 that includes a
minimum volume commitment. The pipeline is expected to be completed in
mid-2019.

Construction continues on the Bayou Bridge Pipeline extension from Lake
Charles, Louisiana, to St. James, Louisiana. The pipeline is currently
operating from Nederland, Texas, to Lake Charles, and commercial
operations on the extension are expected to begin in the fourth quarter
of 2018. The Partnership owns a 40 percent interest in the joint venture.

The Partnership began construction of a new 25,000 BPD isomerization
unit at the Phillips 66 Lake Charles Refinery to increase production of
higher octane gasoline blend components. The $200 million project
includes a long-term agreement with Phillips 66 for processing services
with a minimum volume commitment. Completion is expected by the end of
2019.

The Sand Hills Pipeline capacity was close to 400,000 BPD at the end of
the first quarter. Further expansion of the line to over 450,000 BPD is
expected to be completed in the second half of 2018. Sand Hills
transports NGLs from the Permian Basin to the Texas Gulf Coast. Phillips
66 Partners owns a one-third interest in this joint venture.

The Sacagawea Pipeline joint venture is constructing a 24-mile raw
natural gas pipeline system linking production in Mountrail County,
North Dakota, to gathering and processing capacity in McKenzie County,
North Dakota. The project is anticipated to be completed in the third
quarter of 2018. Phillips 66 Partners owns a 49.5 percent interest in
the joint venture.

Investor Webcast

Members of Phillips 66 Partners executive management will host a webcast
today at 2 p.m. EDT to discuss the Partnership’s first-quarter
performance. To listen to the conference call and view related
presentation materials, go to www.phillips66partners.com/events.
For detailed supplemental information, go to www.phillips66partners.com/reports.

About Phillips 66 Partners

Headquartered in Houston, Phillips 66 Partners is a growth-oriented
master limited partnership formed by Phillips 66 to own, operate,
develop and acquire primarily fee-based crude oil, refined petroleum
product and natural gas liquids pipelines and terminals and other
transportation and midstream assets. For more information, visit www.phillips66partners.com.

^{CAUTIONARY STATEMENT FOR THE PURPOSES OF THE "SAFE HARBOR"
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995}

^{This news release contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, which are intended to be covered by the safe harbors created
thereby. Words and phrases such as “is anticipated,” “is estimated,” “is
expected,” “is planned,” “is scheduled,” “is targeted,” “believes,”
“continues,” “intends,” “will,” “would,” “objectives,” “goals,”
“projects,” “efforts,” “strategies” and similar expressions are used to
identify such forward-looking statements. However, the absence of these
words does not mean that a statement is not forward-looking.
Forward-looking statements relating to Phillips 66’s operations
(including joint venture operations) are based on management’s
expectations, estimates and projections about the company, its interests
and the energy industry in general on the date this news release was
prepared. These statements are not guarantees of future performance and
involve certain risks, uncertainties and assumptions that are difficult
to predict. Therefore, actual outcomes and results may differ materially
from what is expressed or forecast in such forward-looking statements.
Factors that could cause actual results or events to differ materially
from those described in the forward-looking statements include the
continued ability of Phillips 66 to satisfy its obligations under our
commercial and other agreements; the volume of crude oil, refined
petroleum products and NGL we or our joint ventures transport,
fractionate, terminal and store; the tariff rates with respect to
volumes that we transport through our regulated assets, which rates are
subject to review and possible adjustment by federal and state
regulators; fluctuations in the prices for crude oil, refined petroleum
products and NGL; liabilities associated with the risks and operational
hazards inherent in transporting, fractionating, terminaling and storing
crude oil, refined petroleum products and NGL; potential liability from
litigation or for remedial actions, including removal and reclamation
obligations under environmental regulations; and other economic,
business, competitive and/or regulatory factors affecting Phillips 66
Partners’ businesses generally as set forth in our filings with the
Securities and Exchange Commission. Phillips 66 Partners is under no
obligation (and expressly disclaims any such obligation) to update or
alter its forward-looking statements, whether as a result of new
information, future events or otherwise.}

^{Use of Non-GAAP Financial Information—This news release
includes the terms “EBITDA,” “adjusted EBITDA,” “distributable cash
flow,” “run-rate EBITDA,” and “coverage ratio.” These are non-GAAP
financial measures. EBITDA and adjusted EBITDA are included to help
facilitate comparisons of operating performance of the Partnership with
other companies in our industry. EBITDA and distributable cash flow help
facilitate an assessment of our ability to generate sufficient cash flow
to make distributions to our partners. We believe that the presentation
of EBITDA, adjusted EBITDA and distributable cash flow provides useful
information to investors in assessing our financial condition and
results of operations. Our coverage ratio is calculated as distributable
cash flow divided by total cash distributions and is included to help
indicate the Partnership’s ability to pay cash distributions from
current earnings. The GAAP performance measure most directly comparable
to EBITDA and adjusted EBITDA is net income. The GAAP liquidity measure
most comparable to EBITDA and distributable cash flow is net cash
provided by operating activities. The GAAP financial measure most
comparable to our coverage ratio is calculated as net cash provided by
operating activities divided by total cash distributions. These non-GAAP
financial measures should not be considered as alternatives to GAAP net
income or net cash provided by operating activities. They have important
limitations as analytical tools because they exclude some but not all
items that affect net income and net cash provided by operating
activities. They should not be considered in isolation or as substitutes
for analysis of our results as reported under GAAP. Additionally,
because EBITDA, adjusted EBITDA and distributable cash flow may be
defined differently by other companies in our industry, our definition
of EBITDA, adjusted EBITDA and distributable cash flow may not be
comparable to similarly titled measures of other companies, thereby
diminishing their utility.}

^{Run-rate adjusted EBITDA is a forecast of future EBITDA, and is
based on the Partnership’s projections of annual adjusted EBITDA
inclusive of both currently owned assets ($1 billion) and future
potential acquisitions and organic growth by the Partnership ($1.1
billion). Run-rate adjusted EBITDA is included to demonstrate the
historical growth of the Partnership through the first quarter of 2018,
as well as management’s intention of future growth through acquisitions
and organic projects. We are unable to present a reconciliation of
targeted run-rate adjusted EBITDA to net income, which is the nearest
GAAP financial measure, because certain elements of net income,
including interest, depreciation and taxes, were not used in the
forecasts and are therefore not available. Together, these items
generally result in run-rate adjusted EBITDA being significantly greater
than net income. Current run-rate adjusted EBITDA is the current
quarter’s adjusted EBITDA annualized, and a reconciliation of current
quarter adjusted EBITDA to net income accompanies this release. The
disaggregation of capital spending between expansion/growth and
maintenance is not a distinction recognized under GAAP. We provide such
disaggregation because the Partnership will generally fund maintenance
capital spending with cash from operating activities and fund
expansion/growth capital spending with financing activities. We believe
this is an important distinction in our liquidity profile.}

^{References in the release to earnings and capital spending refer
to net income and capital spending attributable to the Partnership,
respectively. References to EBITDA refer to earnings before interest,
income taxes, depreciation and amortization.}

Results of Operations (Unaudited)

Summarized Financial Statement Information
			Millions of Dollars Except as Indicated
			Q1 2018						Q4 2017
Selected Income Statement Data
Total revenues and other income				$	355					331
Net income				172						164
Net income attributable to the Partnership				172						162
Adjusted EBITDA				247						254
Distributable cash flow				194						172
Net Income Attributable to the Partnership
Per Limited Partner Unit—Diluted (Dollars)
Common units				$	0.87					0.83
Selected Balance Sheet Data
Cash and cash equivalents				$	167					185
Equity investments				1,986						1,932
Total assets				5,386						5,334
Total debt				2,946						2,945
Equity held by public
Preferred units				746						746
Common units				2,308						2,274
Equity held by Phillips 66
Common units				519						487
General partner				(1,338		)				(1,345	)

Statement of Income
				Millions of Dollars
				Q1 2018						Q4 2017
Revenues and Other Income
Operating revenues—related parties					$	249					246
Operating revenues—third parties					7						8
Equity in earnings of affiliates					98						76
Other income					1						1
Total revenues and other income					355						331
Costs and Expenses
Operating and maintenance expenses					97						82
Depreciation					28						28
General and administrative expenses					16						17
Taxes other than income taxes					10						9
Interest and debt expense					30						29
Total costs and expenses					181						165
Income before income taxes					174						166
Income tax expense					2						2
Net income					172						164
Less: Net income attributable to Predecessors					—						2
Net income attributable to the Partnership					172						162
Less: Preferred unitholders’ interest in net income attributable to the Partnership					9						9
Less: General partner’s interest in net income attributable to the Partnership					53						48
Limited partners' interest in net income attributable to the Partnership					$	110					105

Selected Operating Data
	Q1 2018						Q4 2017
Wholly Owned Operating Data
Pipelines
Pipeline revenues (millions of dollars)		$	102					110
Pipeline volumes(1) (thousands of barrels daily)
Crude oil		947						968
Refined products and natural gas liquids		798						978
Total		1,745						1,946
Average pipeline revenue per barrel (dollars)		$	0.65					0.62
Terminals
Terminal revenues (millions of dollars)		$	39					40
Terminal throughput (thousands of barrels daily)
Crude oil(2)		447						478
Refined products		719						798
Total		1,166						1,276
Average terminaling revenue per barrel (dollars)		$	0.37					0.34
Storage, processing and other revenues (millions of dollars)		$	115					104
Total operating revenues (millions of dollars)		$	256					254
Joint Venture Operating Data(3)
Crude oil, refined products and natural gas liquids (thousands of barrels daily)		603						559

(1)		Represents the sum of volumes transported through each separately tariffed pipeline segment.
(2)		Bayway and Ferndale rail rack volumes included in crude oil terminals.
(3)		Proportional share of total pipeline volumes of joint ventures consistent with recognized equity in earnings of affiliates.

Capital Expenditures and Investments
			Millions of Dollars
			Q1 2018					Q4 2017
Capital Expenditures and Investments
Expansion			$	57				106
Maintenance			12					21
Total Partnership			69					127
Predecessors			—					1
Total Consolidated			$	69				128

Cash Distributions
			Millions of Dollars
			Q1 2018						Q4 2017
Cash Distributions†
Common units—public				$	38					36
Common units—Phillips 66				50						46
General partner—Phillips 66				51						47
Total				$	139					129
Cash Distribution Per Common Unit (Dollars)				$	0.714					0.678
Coverage Ratio*				1.40						1.33

†Cash distributions declared attributable to the indicated periods.

*Calculated as distributable cash flow divided by total cash distributions. Used to indicate the Partnership’s ability to pay cash distributions from current earnings. Net cash provided by operating activities divided by total cash distribution was 1.23x and 1.84x at Q1 2018 and Q4 2017, respectively.

Reconciliation of Adjusted EBITDA and Distributable Cash Flow to Net Income
			Millions of Dollars
			Q1 2018						Q4 2017
Reconciliation to Net Income Attributable to the Partnership
Net income attributable to the Partnership				$	172					162
Plus:
Net income attributable to Predecessors				—						2
Net Income				172						164
Plus:
Depreciation				28						28
Net interest expense				29						29
Income tax expense				2						2
EBITDA				231						223
Proportional share of equity affiliates’ net interest, taxes and depreciation				15						29
Expenses indemnified or prefunded by Phillips 66				—						1
Transaction costs associated with acquisitions				1						1
EBITDA attributable to Predecessors				—						—
Adjusted EBITDA				247						254
Plus:
Deferred revenue impacts*†				5						(3	)
Less:
Equity affiliate distributions less than proportional EBITDA				10						22
Maintenance capital expenditures†				10						19
Net interest expense				29						29
Preferred unit distributions				9						9
Distributable cash flow				$	194					172
*Difference between cash receipts and revenue recognition.
†Excludes MSLP capital reimbursements and turnaround impacts.

Reconciliation of Distributable Cash Flow to Net Cash Provided by Operating Activities
			Millions of Dollars
			Q1 2018							Q4 2017
Reconciliation to Net Cash Provided by Operating Activities
Net Cash Provided by Operating Activities				$	171						238
Plus:
Net interest expense				29							29
Income tax expense				2							2
Changes in working capital				(17		)					—
Undistributed equity earnings				8							1
Deferred revenues and other liabilities				38							(45	)
Other				—							(2	)
EBITDA				231							223
Proportional share of equity affiliates’ net interest, taxes and depreciation				15							29
Expenses indemnified or prefunded by Phillips 66				—							1
Transaction costs associated with acquisitions				1							1
EBITDA attributable to Predecessors				—							—
Adjusted EBITDA				247							254
Plus:
Deferred revenue impacts*†				5							(3	)
Less:
Equity affiliate distributions less than proportional EBITDA				10							22
Maintenance capital expenditures†				10							19
Net interest expense				29							29
Preferred unit distributions				9							9
Distributable cash flow				$	194						172
*Difference between cash receipts and revenue recognition.
†Excludes MSLP capital reimbursements and turnaround impacts.

View source version on businesswire.com: https://www.businesswire.com/news/home/20180427005177/en/

Source: Business Wire
(April 27, 2018 - 7:00 AM EDT)

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